More than 48 million retired workers received Social Security benefits in September.
The most successful retirement program in America, which has pulled seniors out of poverty for more than eight decades, is in trouble.
President Biden is giving a speech. The official White House photo was taken by Adam Shultz.
Every year since 1940, the Social Security Board of Trustees issues a report detailing the program's financial state. New legislation, economic growth, and demographic changes are some of the variables that are taken into account in the report. There were 36 previous reports before the latest one.
The Trustees have highlighted a projected shortfall in revenue collection to sustain existing payouts over the coming 75 years. The long-term cash shortfall is estimated in the report.
The good news is that Social Security is not in danger of insolvency. Money from the payroll tax on earned income will continue to be collected as long as Americans work.
Unless lawmakers on Capitol Hill do something to strengthen Social Security, existing payouts will be unsustainable for a long time. According to the Trustees Report, the Old- Age and Survivors Trust Fund will exhaust its assets by 2034. A benefit cut of 23% is needed for the OASI to keep benefit payments going.
President Joe Biden believes he can fix Social Security.
While on the campaign trail prior to the November 2020 election, Biden released a four point plan that outlines the changes he feels are necessary to strengthen Social Security for decades to come. These changes are in no order.
The 12.4% payroll tax applies to all earned income between $0.01 and $150,000. Earned income above the maximum taxable earnings cap is not subject to payroll tax.
Biden wants to make all earned income over $400,000 subject to the payroll tax. There would be a doughnut hole if earned income remained exempt. Thanks to cost-of-living adjustments and wage growth, this hole would shrink over time.
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) has been the inflation measure used to determine the annual cost of living adjustment. It has cost seniors 40% of their purchasing power since the beginning of the century because it has done a poor job of accounting for inflation.
The Consumer Price Index for the Elderly (CPI-E) is what Biden wants to change. The main focus of the CPI-E would be on the spending habits of senior citizens, who make up the majority of Social Security recipients. It should result in more accurate yearly cost of living adjustments.
Growing expenses are one of the biggest challenges retirees face. Medical care and transportation can increase in cost as Americans get older.
President Biden wants to increase the primary insurance amount by 1% every year. An old Social Security beneficiary would see a 5% boost to their PIA, which can be used to offset higher expenses.
A worker with low lifetime earnings and 30 years of coverage can get a maximum Social Security benefit of $950 per month. The poverty level for a single tax filer is $181 a month.
The minimum benefit will be adjusted to 1 25% of the federal poverty level. More than 16 million older people are out of poverty each year thanks to Social Security.
The image came from the same source as the one above.
The tens of millions of current and future Social Security beneficiaries want to know if Joe Biden's proposal has traction on Capitol Hill. Looking ahead to the elections is a possibility for some Americans.
The balance of power in both houses of Congress will be up for grabs in the next few years. There are two main reasons that the elections will fail to give a path for Joe Biden's Social Security proposal to become law.
There are ideological differences between the Democrats and Republicans when it comes to fixing Social Security. Republicans prefer to reduce long-term outlays by gradually raising the full retirement age, while Democrats prefer to raise revenue by increasing taxation on high earner. Both solutions help strengthen Social Security.
There's a problem here. Both parties have a proposal that makes Social Security stronger and neither has been willing to compromise.
There aren't enough votes in the Senate to pass the Social Security plan. Neither party will have a majority in the US Senate after the election. 60 "yes" votes are needed to amend the social security program. Since no members of the GOP have shown support for Biden's proposal, he would need bipartisan support from at least a few Republicans in the Senate to get his plan passed.
Social Security legislation is likely to stall for at least another two years despite the promise of a new Congress.
All Rights Reserved © 2024
